Traders revised their rate cut bets for January after the latest labor report came in roughly in line, while the unemployment rate dipped to 4.4%. After the latest job report, the chances of a 25 basis point rate cut stand at 3.

J.P. Morgan predicts the U.S. Federal Reserve's next move will be a rate hike in 2027, while Barclays and Goldman Sachs joined Morgan Stanley in postponing rate cut calls to mid-2026 as data suggested that the labor market was not rapidly deteriorating.

Some Federal Reserve officials who supported cutting a key interest rate earlier this month could have instead backed keeping the rate unchanged, minutes released Tuesday show, underscoring the divisions and uncertainty permeating the central bank.

Federal Reserve Bank of Minneapolis President Neel Kashkari said interest rates may be close to a neutral level for the US economy now, leaving it up to incoming data to guide the central bank’s actions.

A drop in the unemployment rate may ease concerns at the U.S. central bank about labor market weakness, with traders betting Federal Reserve Chair Jerome Powell has delivered his last interest rate cut before his term ends in May and leaving any further policy easing in the hands of whomever President Donald Trump taps as Powell's successor.

"Mortgage interest rates went down before the Fed cut rates in September but went up after," says Ali Wolf, chief economist at NewHomeSource. "This is because the Fed is cutting the federal funds rate, which is a short-term interest rate. Mortgage interest rates, on the other hand, are influenced by investors and the yield on the 10-year Treasury."

The Congressional Budget Office has released new economic projections, expecting the Federal Reserve to cut short-term rates in 2026

Looking ahead to 2026, the Fed’s own median projection or “dot plot” suggested there would be only one additional 25 basis points cut. This would move the rate to around 3.25% to 3.50% by year end. Market expectations are slightly more dovish, calling for two rate cuts, which would push rates closer to 3%.

Federal Reserve Chair Jerome Powell revealed Sunday night that the Justice Department served the central bank with grand jury subpoenas, threatening a criminal indictment related to Powell’s testimony before the US Senate.

A jobs report to be released on Friday will provide a key gauge of the health of the U.S. economy as the Federal Reserve slashes interest rates in an effort to revive an ailing labor market. The fresh data comes two weeks after a blockbuster report on economic growth appeared to rebuke worries about the wider economy.